Index Aerospace Panel Begins Taking Shape New Export Bill Introduced in Congress Offset Commission Lists Potential Actions But Recommends Additional Study Blacklisting Implementation Delayed The President's WASHINGTON PIPELINE:Bush Appointees Instill Confidence and Show Commitment to Defense and Economic Growth Coalition Offers Defense Logistics Cure to President Commercial Space Has $61 Billion Impact on U.S. Economy AIA VIEWPOINT: Community Responsibility Needed for Noise MD Helicopters Joins Association A•E•R•O•I•N•D•I•C•A•T•O•R•S: Aerospace Employment Rising WASHINGTON WATCH: AIA Seeks Further Acquisition Reform in Defense Legislation

Aerospace Panel Begins Taking Shape

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Legislation that would further reform U.S. export policies has been introduced in the U.S. Senate.

Senators Phil Gramm (R-Tex.), Mike Enzi (R-Wyo.), Paul Sarbanes (D-Md.), and Tim Johnson (D-S.D.) introduced the Export Administration Act (EAA) of 2001 in January.

In the House, Rep. Henry Hyde (R-Ill.), chairman of the House International Relations Committee, said he will make reform of the EAA a priority early this year. Hyde’s declaration combined with Gramm’s enthusiasm suggests that a new EAA could reach the president’s desk this year.

Gramm and Enzi championed a similar bill that last year made it out of the Senate Banking, Housing and Urban Affairs Committee before stalling on the Senate floor.

The same committee held hearings on the new bill last month, and Gramm said he hopes it will reach the Senate floor early this spring.

The EAA provides the legal framework for the executive branch to implement export controls on non-military and dual-use items. The last EAA was written in 1979 and expired in 1994. The International Emergency Economic Powers Act covered dual-use exports until late last year when the 1979 EAA was extended until August 20, 2001.

AIA is encouraged by some provisions in the bill, particularly sections that require removal from control lists of items available from foreign sources.

Also, the proposed legislation authorizes the secretary of commerce to appoint export control advisory committees, giving U.S. industry a voice in government decision-making in export controls.

In addition, industry is seeking some changes to the EAA draft, particularly to inflexible and sharply increased penalties and a "whistle blower" provision that could discourage employees from using established company export control compliance procedures.

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The National Commission on the Use of Offsets in February issued a report on the impact of offsets on the U.S. aerospace and defense industry and said further study is needed.

The commission said actions to consider could include:

Commissioners recommended further study of offsets and development of policy recommendations. They didn’t endorse a specific course and noted that they haven’t yet considered the merits of the potential recommendations.

The report was approved on the last day of the Clinton Administration and cleared for distribution by the Bush Administration.

Offsets are requirements negotiated in a sale of products to a foreign government that usually involve the buyer producing part of the product, receiving technological or economic benefits from the U.S. exporter, or both.

The report is a summary of the use of offsets — particularly those used in defense trade. It asserts that, while a significant number of U.S. jobs could be lost due to offsets, more jobs would be lost if U.S. industry stopped providing offsets.

Most commissioners recognized that without offsets U.S. sales would be lost to competitors in Europe and elsewhere because the United States is no longer the sole source of aerospace and defense equipment.

The report emphasizes the need to develop "creative policies" to save U.S. jobs without inadvertently causing job losses.

Five of the eleven commissioners are from the executive branch and will change with the new administration, and it may be weeks before it’s known how the Bush Administration will direct further study by the panel.

AIA has suggested that additional effort by the commission should include discussions with foreign governments and foreign labor unions, consideration of specific offset programs of our allies, and an analysis of U.S. practices in procuring foreign produced or designed defense articles.

Another study panel, the Presidential Commission on the Future of the U.S. Aerospace Industry, is likely to also look into offsets in the aerospace industry. The Offset Commission report will provide insight for the Aerospace Commission.

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In one of its last acts, the Clinton Administration in late December issued a final rule imposing new and onerous requirements on businesses seeking federal contracts.

The regulation, generally known as the "Blacklisting Rule," went into effect January 19 before the incoming administration could delay it for review.

Since then, however, the General Services Administration, NASA, and the Interior, Transportation, Health and Human Services, and Commerce departments have delayed implementation of the rule.

The Defense Department has informally advised industry that the Federal Acquisition Regulations (FAR) Council is seeking a stay of implementation. If that action isn’t approved by the administration soon, DoD said it would issue its own deviation from the regulation.

Meanwhile, aerospace companies are receiving DoD solicitations containing the onerous clauses.

After the Clinton Administration move late last year, AIA sent a letter to then President-elect Bush urging suspension of the rule until Congress can hold hearings to evaluate it.

AIA earlier argued against the adoption of the rule, and urged that implementation be delayed at least 120 days to give industry time to develop data bases and the government time to prepare implementing instructions and train personnel.

Though adopted by the FAR Council, the AIA recommendation was deleted by the White House.

The association also endorsed efforts by the Council of Defense and Space Industries Associations urging the incoming administration not to implement the rule.

AIA continues to press its case and monitor DoD’s action.

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President Bush’s top appointments in national security, research and development, transportation, and international trade provide confidence for our industry.

With Donald Rumsfeld and Paul Wolfowitz at the Pentagon and Colin Powell at the State Department, the president has assembled a national security team with unmatched experience and complementary skills. Powell, Wolfowitz, and Vice President Richard Cheney worked closely during the administration of the new president’s father, particularly in the war against Iraq. Rumsfeld’s new tour as defense secretary is his second — he led the Pentagon during the Ford Administration as the United States emerged from the Vietnam War.

In Norman Mineta, the president has a secretary of transportation who oversaw DOT’s work as chairman of the House Public Works and Transportation Committee (now the Transportation and Infrastructure Committee). As chairman of the 1997 National Civil Aviation Review Commission, he tackled the most complex infrastructure, organization, and safety questions involving FAA. He will work well with Jane Garvey, now in the fourth year of a five-year term as FAA administrator.

Robert Zoellick, the new U.S. trade representative, served in the Treasury Department during the Reagan Administration and was under secretary of state for economic and business affairs during the first Bush Administration. As a member of the U.S. Trade Deficit Review Commission, he is familiar with aerospace contributions to the balance of trade. His work at the Center for Strategic and International Studies and on Defense Secretary William Cohen’s Defense Policy Board gives him a thorough understanding of defense policy and budget issues.

The president’s decision to retain Dan Goldin for a time as NASA administrator and Ed Stimpson as representative to ICAO shows a determination to avoid hasty moves at posts of unsurpassed importance to our nation’s technical and economic future.

As this article went to press, Bush presented three new names — Richard Armitage for deputy secretary of state, Dov Zakheim for under secretary of defense and comptroller, and Kenneth I. Juster as under secretary of commerce. All have strong backgrounds and experience.

The common denominator among our new leaders is the ability to hit the ground running, a welcome trait at any time but particularly so given this administration’s abbreviated transition.

The president is moving deliberately and discreetly, and it will take months to fill the many positions subordinate to the cabinet-level posts, putting a premium on experience at the top.

We in aerospace should be optimistic about the administration’s willingness to tackle issues that concern us most. President Bush’s appointees know the importance of the Presidential Commission on the Future of the U.S. Aerospace Industry, and no one will have to coach them on the commission’s recommendations.

As the new administration reviews policies and priorities, it continues to commit to strengthening our defenses and maintaining our economic growth. The administration so far is sensitive to the importance of aerospace to national security, technological leadership, and economic prosperity.

In the days ahead, we should support the president and his team. If the start is indicative of what’s to come, America will be well served.

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A coalition of industry associations, including AIA, recently presented a transition package of defense logistics and readiness issues to President Bush.

The package of viewpoints, A Mandate for Focus, presents serious challenges that exist today and corrective actions for the new administration’s consideration.

Prompt attention will result in improved support for warfighters and hundreds of millions of dollars in operational support savings that can be reinvested into force modernization.

The Industry Logistics Coalition (ILC) represents the majority of U.S. defense manufacturers and service companies in logistics, depot maintenance, and lifecycle support for the Defense Department.

Membership includes AIA and eight other Washington-based professional associations.

Industry has supported the need to complete acquisition, logistics, and financial reform efforts started by DoD in the 1990s. However, logistics reform efforts in the previous administration had mixed results.

The coalition said it believes corrective action for organizational and structural problems within the Defense Department logistics system are long overdue.

Major issues identified by ILC include:

• The need to reassess and reorganize the Office of the Deputy Under Secretary of Defense for Logistics and Materiel Readiness.

• The requirement for DoD and the services to adopt a consistent definition and implementation of logistics "core" capability.

• Transformation of logistics reform into a performance-based process that buys system lifecycle support capability rather than separate products and services.

• Renewed emphasis on competitive sourcing and partnering as a way of doing business.

• Need to address public and private sector workforce and human capital challenges.

• Reform of the existing Defense Working Capital Fund structure.

The coalition urged Bush to make defense logistics reform a major initiative within the Defense Department and emphasize appointment of a vigorous Under Secretary of Defense for Logistics and Materiel Readiness with extensive industry logistics experience.

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The impact of commercial space transportation on the U.S. economy was more than $61.3 billion in 1999.

Space-related economic value was assessed in a study released in February at the FAA’s Commercial Space Transportation Forecast Conference.

The value of launch vehicle manufacturing was actually $3.5 billion in 1999, yet commercial launches served as an enabler for satellite and ground equipment manufacturing ($30.9 billion), satellite services ($25.8 billion), remote sensing ($0.2 billion), and distribution industries ($0.9 billion).

The total number of jobs enabled by commercial launch activity was nearly a half million in 1999 (497,346), with 28,617 directly attributable to launch vehicle manufacturing.

The report was careful to break down the $61.3 billion economic impact into three categories: direct impact (labor and purchases — $9.6 billion), indirect impact (goods and labor from suppliers — $29.5 billion), and induced impact (successive rounds of household spending — $22.2 billion).

In reviewing the report at the conference, Ken Gordon of the Aerospace Corporation noted that the direct and indirect figures alone ($39.1 billion) compare very favorably with other industries that have a significant presence in public policy development.

While commercial space contributes $39.1 billion in direct and indirect impact to the U.S. economy, farming contributes $74 billion, tobacco $19.9 billion, and textiles $25 billion.

The figures are for commercial space only and are much larger when civil space (NASA), national security space (DoD and NRO), and the aircraft industry are included.

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Throwing problems over the transom to let others solve them doesn’t work.

This is also true for protecting communities from unacceptable aircraft noise, yet this is the approach some are taking to solve the problem.

Greater noise stringency or restrictions on aircraft operations alone cannot solve the problem. It’s time for a new approach.

The balanced program for mitigating community noise established by the ICAO Committee on Aviation Environmental Protection (CAEP) at its second meeting in 1991 was a farsighted approach to developing comprehensive solutions to reduce noise.

Since then only three of the four elements of the balanced program have been actively pursued — reduction of aircraft noise, use of operational procedures to avoid noise sensitive areas, and soundproofing of homes within noise-impacted areas.

Now, the fourth — land-use preservation and planning — has become the focal point for CAEP action.

According to a recent General Accounting Office (GAO) report on aviation and the environment, communities have squandered a priceless resource created by the phase-out of the Stage 2 aircraft fleet. The resource is the area of land near airports that is the result of aircraft manufacturers’ ability to produce aircraft that significantly limit the land area exposed to unacceptable noise.

To envision this, place a compact disk case in the center of a piece of notebook paper where the visible paper would represent the area where noise has been reduced due to airline industry investment in new and hushkitted aircraft.

While airlines, manufacturers, and airports have invested more than $100 billion in noise reduction efforts, there has been encroachment of development into the noise contours that existed in 1990. This is the area gained through the Stage 2 phaseout now being squandered.

Worse yet, the GAO reports that 20 percent of the 50 largest U.S. airports have detailed encroachment into the noise contour as it exists today, and an even greater number report that development around the airport outside the noise contour is reaching an alarming level.

This is a negative sum game where everyone loses. Until communities begin to accept their responsibility for preserving and protecting land areas around airports, noise will continue to adversely affect those living close to airports, and the situation will thwart efforts to meet needed airport capacity requirements.

Of those affected by aircraft noise in 1975, less than 10 percent of the households now experience that noise level despite encroachment. This is a remarkable achievement due in no small measure to the Airport Noise and Capacity Action of 1990 (ANCA).

Through ANCA and noise mitigation technology used in new and existing aircraft, the United States will continue progress to protect communities from aircraft noise while enjoying a seamless national aerospace system, but only with the help of communities.

Had other countries adopted an ANCA-like approach, they would face the same noise climate as in the United States. Instead, they now face a climate of increasing noise exposure.

While ANCA is one example of how a balanced program might be structured, it must now be strengthened to incorporate strict land resource management and planning.

Within 10 years operators have transitioned to all Stage 3 fleets. This year CAEP recommended a new Chapter 4 ("Stage 4") noise standard for new aircraft designs. It’s far more rigorous than the Stage 3 standard and demonstrates that manufacturers have continued to make progress in reducing noise.

Isn’t it now time for communities to help solve the noise problem?

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The newest member of AIA is MD Helicopters, Inc. Headquartered in Mesa, Ariz., the company is one of the fastest-growing producers of helicopters for corporate, law enforcement, and emergency medical service uses.

MD Helicopters designs, tests, manufactures, assembles, overhauls, and repairs helicopters. The firm is known for its quiet NOTAR system on the Explorer, MD 600N, and 520N. Hovering at 500 feet, the helicopters can’t be heard on the ground, a benefit that has increased public acceptance of the aircraft.

MD Helicopter fuselages are supplied by Kaman Aerospace and Turkish Aircraft Industries, and engines are from Pratt & Whitney Canada and Rolls-Royce. The company has 360 workers, 200 in plant production and operations.

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Aerospace industry employment, declining since the spring of 1998, began growing last fall. In the fourth quarter, industry employment increased 7,000 to end the year at 791,000.

Further gains are expected in 2001 on the basis of record new orders last year and high levels of hours worked and overtime.

In December, average weekly hours for aerospace production workers reached 44.4 — the highest level since December 1998. Average overtime hours grew to 6.3 industrywide and 8.1 in the aircraft engine sector.

Current aerospace industry employment is 100,000 workers below the 1998 peak.

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AIA is working with other industry associations in the Acquisition Reform Working Group (ARWG) to develop a package of acquisition reform legislation for consideration by Congress this year.

The package incorporates a number of AIA legislative priorities for reforming government-business relationships, including:

• Expand the definition of contracts for commercial items to cover time and material contracts for services.

• Include products from a "commercial entity" in the definition of "commercial items," allowing greater use of streamlined procedures.

• Reform standards of proof under the Civil False Claims Act.
• Remove barriers to commercial leasing by federal agencies.
• Eliminate restrictions on the use of other transaction authority for development of military prototypes.
• Make the Cost Accounting Standards Board a fully independent regulatory board.
• Stabilize defense funding through the greater use of multi-year program authority.
• Eliminate the requirement that prime contractors only count certified small and disadvantaged businesses in meeting subcontracting goals.

Congress is expected to consider acquisition reform legislation in the Defense Authorization Act process anticipated to begin in earnest in April.

Given current pressure on federal spending, the new administration will likely show a renewed interest in acquisition reform as a means to free up funds for critical programs.

AIA is working aggressively to ensure that Congress enacts the ARWG legislation before adjourning.

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